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Why are Profit and Loss Accounts prepared?
Profit and Loss Account is a period statement which is prepared to show the profit or loss incurred by the Organization in the year for which it is prepared. It is prepared to disclose the result of operations of all the business transactions during a given period of time. It is also known as profitability statement .It is the final result of all business transactions of the organization. Profit and Loss account has four components namely Manufacturing Account, Trading Account, Profit and Loss Account and Profit and Loss Appropriation Account. Gross profit or Gross loss so calculated in trading account is taken to the profit and loss account.
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